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The New Auditor’s Opinion: A Waste of Time?

The Institute of Public Auditors in Germany (IDW) has spent much time introducing the new auditor’s opinion. Not counting the drafts which were discarded, 5 audit standards were ultimately revised or reissued entirely. And this year, the new auditor’s opinion has arrived for German mid-sized companies. While the old auditor’s opinion fit on a single page, the new one is four times as long.

IDW explained its introduction of the new auditor’s opinion by noting that the old auditor’s opinion had failed to close the expectation gap. The “expectation gap” refers to the idea that, while the perception is that an unqualified auditor’s opinion represents a quality seal attesting to the financial health and future success of the audited company, the fact is that it only means that the company has complied with the law and with its company agreement. The readers of the financial statements must judge for themselves whether or not the company is profitable.

Accordingly, the new auditor’s opinion essentially states that

  • the degree of certainty sought by the auditor is no guarantee that the audit of the financial statements has uncovered every material error; and
  • future events may result in a situation in which the company will have to be ended.

Now why the auditor’s opinion has to be three times as long to do this, that I don’t know.

Such an expectation gap does not exist:

  • Professional institutional investors have no expectation gap because they understand accounting and auditing and know that the audit examines only the propriety of the financial statements.
  • Readers of the financial statements who, by contrast, have no understanding of accounting and auditing, can also expect no help from the new auditor’s opinion, since they don’t understand it.
  • In other words, a person can only have an expectation gap if he or she understands accounting but doesn’t know that the audit is limited to the propriety of the financial statements. Whether such people exist is doubtful: “How much did the company earn?” That’s the first question posed by readers of the financial statements. The reader doesn’t look at the auditor’s opinion first, but at the income statement. There, upon seeing e.g. that revenues and earnings are down, or that the company is running a net loss, the reader will be able to recognize that the company is in crisis. And in addition to the numbers, it also helps to look at the management report, and particularly the report on risks and opportunities.

Mark Schüttler, MOORE STEPHENS Westfalen AG

But if there is no expectation gap, IDW could have kept the old auditor’s opinion.

And so, from the viewpoint of an auditor for a mid-sized company, the new auditor’s opinion ought to be preceded by a quote from Johann Wolfgang von Goethe from 200 years ago:

“One must consider that there are many people who want to say something unique without being productive, and the most wonderful things are revealed in this way.”


Literature: Schüttler, Der neue Bestätigungsvermerk: vertane Zeit? Die Mär von der Erwartungslücke!, BC 2019, p. 173 Vol. 4.


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